Wednesday, January 25, 2017

On 3rd January, 2005, Hawkins Cooker had a market cap of Rs 18 crore and its stock was at Rs 33.25. Today, on 25th Jan'17 the stock price is at Rs 2669 and the company's market cap is Rs 1,411 crore. Rs 1 lakh invested in Hawkins Cooker in Jan 2005 is valued at almost Rs. 80 lakhs today.Lets take another example of little known company Camlin Fine Sciences which is our 19-Bagger stock. We recommended this stock 6 years back at price of Rs. 6.05 (adjusted price after 2 stock splits in last 6 years, actual recommended price was Rs. 60.50) and today it’s at Rs. 111.80 giving absolute returns of 1748%. That's too excluding dividend payouts. Mind boggling, isn't it? It's a fact! Company has posted strong growth YoY and rewarded share holders in big way in last 6 years.

Do you own such stocks which can give you similar returns in future?

The number of small-cap stocks is large and finding a quality stock that can give high returns over a long period is tough even for equity analysts. One reason is that such stocks usually have a short history and are not tracked by many analysts and brokerage houses. Then there are risks such as low liquidity, governance concerns and competition from larger players.

Scores of once small companies have over the years grown big, giving investors a 30-50 per cent annual return over 10-15 years and creating fortunes for investors. However, more often than not, we find ourselves at the wrong side of the fence and regret our inability to spot such stocks on time.

If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems and Value Picks is an ideal choice for you.

It’s a fact that 39 Hidden Gems out of 52 released by our equity analysts in last 6 years (till Dec'15) have given more than 100% returns.

Buying Strategy for Small Caps

1. Go for companies with low debt ratio (preferably less than one)

2. A high interest coverage ratio (above 3x) and a high return on equity are big advantages

4. Look at the quality of the management, its governance standards and how investor-friendly the company is.

5. Mid-cap and small-cap companies can be future market leaders, so be patient with your investments

Those who wish to invest in small-cap stocks should do so only if they have a long investment horizon and tolerance for volatility. Small-cap stocks suffer the steepest falls in a bear market and rise the most in a bull market. An investor should stay invested for at least three-five years to allow their portfolio to gain from at least one bull run.

Benefits of Investing in Small Caps

1. Huge growth potential: The first and the most important advantage that a small cap stock gives you is their high growth potential. Since these are small companies they have great scope to rise as opposed to already large companies.

2. Low Valuations: Usually small cap stocks are available at lower valuations compared to mid & large caps. Hence, if you invest in good small cap companies at initial stage and wait for couple of years, you will see price appreciation not only because of growth in top line and bottom line but also due to rerating which happens with increase in market capital of the company.

3. Early Entrance Advantage: Most of the fund house and institutions do not own small caps with low market cap due to less liquidity which make it difficult for them to own sufficient no. of shares. This gives retail investors an opportunity to be an early entrant to accumulate such companies shares. When company grows in market cap by delivering consistent growth and becomes more liquid, entry of fund houses and institutions push the share prices up giving maximum gains to early entrants.

4. Under–Researched: Small cap stocks are often given the least attention by the analysts who are more interested in the large companies. Hence, they are often under - recognized and could be under-priced thus giving the investor the opportunity to benefit from these low prices.

5. Emerging Sectors: In a developing economy where there are several new business models and sectors emerging, the opportunity to pick new leaders can be hugely beneficial. Also the disruptive models in the new age is leading to more churn and faster growth amongst the nimble footed smaller companies.

Concerns while Investing in Small Caps

1. Risk: The first and the most important disadvantage a small cap stock is the high level of risk it exposes an investor to. If a small cap company has the potential to rise quickly, it even has the potential to fall. Owing to its small size, it may not be able to sustain itself thereby leading the investor into great loses. After all, the bigger the company, the harder it is for it to fall.

2. Volatility: Small cap stocks are also more volatile as compared to large cap stocks. This is mainly because they have limited reserves against hard times. Also, it in the event of an economic crisis or any change in the company administration could lead to investors dis-investing thereby leading to a fall in prices.

3. Liquidity: Since investing in small cap stocks is mainly a decision depending upon one’s ability to undertake risk, a small cap stock can often become illiquid. Hence, one should not depend upon them for an important life goal.

4. Lack of information: As opposed to a large cap company, the analysts do not spend enough time studying the small cap companies. Hence, there isn’t enough information available to the investor so that he can study the company and decide about it future prospects.

Saral Gyan team do take care of above concerns by doing in-depth research and analysis of small cap companies before releasing Hidden Gems research reports with buy recommendation. Its sincere efforts, dedication and passion of our equity analysts that 39 out of 52 Hidden Gems released by us during last 6 years have given more than 100% returns to our members. In fact 29 out of these 35 stocks have given returns in the range of 200% to 1800%.Let us evaluate the performance of Hidden Gems stocks of 2014, 2015 and 2016 compared to BSE small cap index.Hidden Gems Stocks 2014 Vs Small Cap Index:

As illustrated in the table above, average returns of Hidden Gems stocks released in 2014 is 177% compared to small cap index average returns of 43.6%. As on date, Hidden Gems stocks of 2014 are outperforming small cap index by whopping 133.4%.

Total 8 Hidden Gems stocks out of 11 released in 2014 have already achieved their target price giving more than 100% returns to our members in period of 6 months to 2 years.

Hidden Gems Stocks 2015 Vs Small Cap Index:

Total 6 stocks of 2015 have already achieved their target price. As illustrated in the table above, average returns of our Hidden Gems stocks released in 2015 is 78.3% compared to average returns of 15.9% of small cap index, out performance of 62.3%.

Hidden Gems Stocks 2016 Vs Small Cap Index:

Our Hidden Gems stocks of 2016 have also outperformed small cap index. Average returns of our Hidden Gems 2016 stocks is 37% compared to small cap index average returns of 16.1%, out performance of 20.9%.

And that's not all! We have a strong history of exploring multibagger micro and small cap stocks. It gives us immense pleasure to share that 39 out of 52 Hidden Gems stocks released in last 6 years (till Dec'15) have given returns above 100%. Moreover, 29 out of these 39 Hidden Gems stocks have given returns in the range of 200% to 1900%.

As many of these reports were made public, you can access read / download our research reports by clicking on the links below:

We are confident that we will continue to hunt best Hidden Gems from universe of small caps by doing authentic, in-depth and unbiased research work and support our members to make educated investment decision.

At Saral Gyan, team of equity analysts keep on evaluating small and mid cap stocks to explore the best Hidden Gems and Value Picks of stock market. Saral Gyan - Hidden Gems and Value Picks are the small and mid cap stocks with high probability to become multi-bagger stocks in future and a path for our investors to create wealth through equity investments in a long run.Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price for medium to long term. If you think to invest in stocks for period of 3 months or 6 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky.Its our mission to ensure that you reap the best returns on your investment, our objective is not only to grow your investments at a healthy rate but also to protect your capital during market downturns.Start investing some portion of your savings in high quality small and mid cap stocks backed by strong fundamentals. Avail attractive discounts by subscribing to our combo packs, click here for details.We would like to inform our readers that prices of our subscription services will increase from 31st Jan 2017. You can subscribe before 31st Jan to avail the maximum discounts. Below table indicates revised subscription prices effective 31st Jan 2017.

This is the last opportunity to subscribe to our services at old subscription prices as you would not be able to avail these discounted prices after revision of our subscription prices by end of this month. Our existing members can also extend their subscription by 12 months. Being an existing member, if your subscription expires in any month of 2017, it will get extended by 12 months and will remain active till respective month of 2018.Below are the details of our annual subscription charges currently which will increase on 31st Jan'17. Click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

Do contact usin case of any queries, we will be delighted to assist you.

Saral Gyan Capital Services

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